Prime Minister backs plans for simpler energy bills, with four core tariffs, to come into effect towards the end of 2013

Gas and electricity customers ‘will get the best possible energy tariff,’ said David Cameron. The prime minister is supporting plans for simpler energy bills. Photograph: Stefan Rousseau/PA

Householders will be presented with gas and electricity bills that are “more fair for everyone” said David Cameron as he backed plans to make energy bills simpler from next winter.

Energy companies will be restricted to offering no more than four core tariffs for each type of fuel and will have to inform customers what the cheapest deal available to them is via their bill. The reforms from Ofgem, which were originally proposed last October, have been backed by the prime minister.

“The package announced today is a huge step towards energy bills that are more fair for everyone,” he said. “This is about putting people before profits. It’s about pensioners being better able to heat their homes in winter, and families better able to cope when the bills arrive.”

He added: “Our aim is that consumers will get the best possible energy tariff – no tricks, no loopholes – and we will use the powers we gained in the Energy Bill earlier this month to make sure this happens.”

• A restriction to four simple core tariffs per fuel type available from each supplier. This includes four for gas and four for electricity. One of the tariffs has to be a standard-variable rate, suppliers can choose the other three from a range of options such as fixed, green and online.

• Suppliers will have to make clearer, through their bills, which is the cheapest tariff. They will all have to use a new tariff comparisons rate (TPR) to do this. This will work in a similar way to the APR used to compere loan and credit card rates.

• Discounts will remain for those who take both gas and electricity from the same supplier and those who opt for paperless billing. These discounts will apply across all tariffs.

• Certain “dead” standard or variable tariffs no longer available to new customers will be banned to reduce the overall number of tariffs and reduce the risk of people paying too much.

• Those on fixed-term contracts will have further protection. Suppliers will be banned from rolling customers onto another fixed-term contract without their consent and will not be allowed to bring in price increases or other charges to fixed tariffs.

New enforceable standards of conducts will come into force this summer, meaning energy companies need to ensure they are dealing with customers in a “fair, transparent and honest way”, said Ofgem. The regulator will have new powers to fine companies who do not do this.

The main reforms on tariff simplification are expected to come in by the “winter of 2013-2014”. Ofgem could not confirm whether this is likely to be before the traditional round of price hikes from energy companies that typically take place every autumn.

Consumer groups welcomed the reforms and said that they were long overdue.

“We have allowed what should be a fair market for an essentially simple service to become a byword for complexity, confusion,” said Mike O’Connor chief executive of Consumer Focus.

Which? said it welcomed the changes but called on the government to do more.

“More must be done to keep costs under control for hard-pressed households who already say spiralling energy prices are their top financial concern,” said Which? executive director Richard Lloyd.

“These moves will help people to get a better deal from their existing supplier but do not go far enough to increase competition and keep prices in check,” he said.

The regulator also confirmed that it is going ahead with work on a pilot scheme that would ensure those who haven’t switched for some time, and vulnerable customers such as those on benefits, will get a personalised estimate on the cheapest tariff across the whole market. This will need the co-operation of all energy suppliers and Ofgem has now set up a working group with those suppliers and consumer groups to work out how the scheme could run. It is also asking energy suppliers to provide more personalised comparisons of their own tariffs to their customers once those customers have submitted enough meter readings to give their personal usage.

Supermarkets and other companies that white label tariffs from the big six energy companies will have to apply for a separate supply licence if the terms and conditions of those tariffs are different in any way. So, for example, Sainsbury’s currently offers its own tariffs in partnership with British Gas. It sometimes offers these at discounted prices to British Gas’s equivalent tariff. In order to be able to do this in the future it will need its own supply licence.